FV v. amortization question

[beastnate123]

Hi everyone, I have question about calculating the total cost of a car loan over a period of time. If this is the wrong subreddit to ask this in, l apologize and am open to any redirection. I posted in r/cpa at first and then realized this may be better suited here.

I am looking into financing a vehicle and and trying to determine what the total cost of this loan will be to me.

Chase has provided these values:

APR: 8.89
Loan term: 6 years
Monthly payment: $359.42
Total principal + interest: $25,878.24

I verified this using an amortization schedule on excel, however I am confused when I do a FV calculation. When I do a FV calculation I get a value of $34,279.51 (P/yr: 12 | N: 72 | I/yr: 8.89 | pmt: -359.42 | calculator set to begin mode)

My question is twofold: (1) do I have a fundamental misunderstanding of what future value is? (2) what is the difference in the amortization calculation and the FV calculation?

From how I understand it, my monthly payment is a fixed payment over a period of time, due at the beginning of each compounding period, with a set interest rate (i.e., an annuity due) and this $34,279.51 result is what the loan will actually cost me (and from what I understand, likely even more if I were to use the effective rate given that the rate they stated is the APR).

Any help in explaining this would be really appreciated.I'm a law student with a somewhat basic knowledge of financial concepts and am always interested in learning more, especially applying this to a real-life decision I am debating on now.

 

[diegonat]

@beastnate123 Did you divide the interest rate by 12 to account for the fact that it's an annual rate but a monthly payment?

 

[beastnate123]

@diegonat No because I used a Texas Instruments BAII financial calculator so it would have factored that in on the back end

 

[beastnate123]

@diegonat Also just tried for shits and giggles, that would give me $5,400

 

[nghi0526]

@beastnate123 9 percent for 6 years i would pass. Find a cheaper car or pay that thing off asap. Dont need a calculator to know thats high.

 

[laurenelizz]

@beastnate123 You got the FV right. What this means is that if you invested $359.42/mo at 8.89 interest for 72 months you would have a total of $34,279.51 at the end.

Another related concept is Present Value which is basically doing FV in reverse. So calculating the amount that you'd need to have today to equate to that stream of future payments. The PV is $20,148.18, the value of the loan today.